Simon Watts: Revenue Minister on the changes to the Foreign Investment Fund

The Revenue Minister's confident changes to the Foreign Investment Fund will greatly benefit tech and startup companies. 

The Government's working on changes which would see new migrants taxed on a realisation basis for interests not easily disposable and acquired before coming to New Zealand. 

It applies to migrants who became tax residents here on or after April last year. 

Simon Watts told Mike Hosking this has been on the radar since he assumed the portfolio. 

He says the system hits migrants —particularly returning Kiwis and those who are wealthy unfairly— and they've been getting good feedback on the changes. 

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Episode Transcript

Speaker 1 (00:00):
A little bit of movement in the tax treatment or

(00:01):
treatment of tax. These are changes to the Foreign Investment
Fund rules. Now the idea is it encourages migrants to
stay in the country. A double tax is a real
concern apparently for many wanting to move here, not only
migrants but expats as well. Essentially, it's about paying tax
on investments when the gains are realized. Now the Revenue Minister,
Simon Watson's with us. Simon, very good morning.

Speaker 2 (00:19):
To you morning.

Speaker 1 (00:21):
Are you part of this big investment welcome to the
world thing over the next couple of days.

Speaker 2 (00:27):
I am. I'm actually in the beehive at the moment,
but I'm heading there this evening to do some talks
tomorrow with energy investors.

Speaker 1 (00:33):
Fantastic. So this treatment without getting too high for looting
about it, and this is mainly aimed at tex at tech.
Has this been on your radar for a while? Is
this a major issue or not?

Speaker 2 (00:44):
Yeah, it has, It's been on the radar. I've heard
it clearly pretty much as I came in as Revenue Minister.
The Zilland's one of the only countries in the world
taxes these foreign investments based on assumed earnings. I guess
you could say paper earnings versus actual real ones. And
this system hits migrants, particularly returning kiwis, and those that

(01:06):
are wealthy unfairly, especially those in the tech and startup
and you know, we've made some changes to fix that system,
and we've been getting some pretty good feedback around that good.

Speaker 1 (01:16):
So an example would be I invest in the company,
its value starts to rocket, I'm not it may well
be still losing money. I'm not getting anything back, but
you were still taxing me on that.

Speaker 2 (01:27):
It's right, in effect, taxing you on the paper profit,
but you haven't got any cash to be able to
pay that tax bill until you actually sell the business
or realize that that's not obviously going to be that helpful.
And we've made changes to allow you to wait until
you actually make that sale before you pay that tax.
And it's quite a simple change in what is a

(01:48):
complex area. But you know, what we do know is
that for wealthy returning kiwis, a lot of them go
to Silicon Valley or wherever they go and start a
business overseas. They make a bit of money, but this
is one of those barriers, and you know, it's not
going to solve the world, but it is actually going
to make it easier for those returning Keys and migrants
to go, Hey, you know, I'm going to go back
to New Zealand and set up life here, and every

(02:10):
one of those people that comes back here is going
to pay tax, and that's more than what we have today.
So from our point of view, you know.

Speaker 1 (02:16):
There's upside any sense of the split, how much of
it's about expats versus new migrants, and the migrants actually
once they land here staying here.

Speaker 2 (02:24):
It's pretty hard to quantify. But from our point of view,
we just want to move any of the barriers that
are stopping these people either coming home or wanting to
choose New Zealand as a place to invest and do business.
So from our point of view, you know, we're not
either either does well for us. But you know, we
had a pro system that was broken and we've taken
the action to fix it, and you know, I think

(02:46):
that's going to be good.

Speaker 1 (02:46):
So when you say you've taken the extra thing, this
goes back to when in twenty four was at April
twenty four.

Speaker 2 (02:52):
It's actually going to be put through in the tax bill,
but it goes We've done it retrospectively, so from the
first of April twenty twenty four this will come into play,
so stick of certainty to investors right now knowing, Okay,
well I know how this is going to work. That's
an upside for me, and I'm going to you.

Speaker 1 (03:09):
Know the other thing, of course, when you get migrants
in the country they want to buy a house, when
are you going to move on that and let them
buy a house?

Speaker 2 (03:16):
Well, that's not under my portfolio, Mike, as you know,
but I'm sure other people are considering that at the
moment that I don't have any update on that.

Speaker 1 (03:25):
Good on your nice and talk. Do you appreciate it
very much? Simon, What's revenue Minister?

Speaker 2 (03:28):
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